Book Review: "Cash Rich Retirement"

It is hard to imagine advice as timely as this, "Don’t count on home equity as your sole source of retirement income." Sentences like this led to me changing my mind about reviewing "Cash-Rich Retirement" by Jim Schlagheck. I was initially going to pass on it having just reviewed the most recent "Rich Dad" book. But when I remembered LifeTwo's advice to our readers concerning these types of books is to read several and not rely on any one book. I decided that it would be prudent to at least skim it especially since many of you might already be familiar with Schlagheck from the public television series Retirement Revolution, which he co-produces.

Every financial advice book has an angle and for "Cash-Rich Retirement" it is using the investing techniques of the "Mega-Wealthy." Schlagheck encapsulates his strategy into a 6-step action plan that at its core emphasizes cash over home equity as the primary retirement asset. It is a more conservative, less speculative approach for long-term saving and (to me at least) his thinking is quite sound. His six steps are:

1. Change your automatic pilot about savings and investing.

Schlagheck recommends taking the self-discipline out of saving by making the process as "automatic" as possible. You do this by setting up an automatic savings program with your paycheck and instructing your broker to automatically reinvest proceeds (interest, dividends, etc.) from your investments.

2. Diversify your holdings in radically different ways.

Schlagheck is a huge believer in diversification and this means more than just having different types of stocks. It means completely different types of asset classes such as cash, stocks, bonds, and real estate. Diversification also includes investing internationally as opposed to just one country (even if that country is the U.S.). Investment professionals call this "asset allocation" and it is a critical component of any proper long-term investment strategy.

3. Build a portfolio with funds, indexes, and objective research.

The concept here is that unless you are extremely wealthy, you will not be able to adequately diversify by holding individual stocks. Instead, for the public equity portion of your portfolio you will want to rely on a mix of mutual funds, indexes, and exchange traded funds. Most 401(k) plans offer mutual funds, and Schlagheck has specific recommendations for which types to pick. He advises to speak up if your company's 401(k) doesn't offer these.

4. Get all the professional help you can.

We at LifeTwo are huge believers in seeking professional guidance for financial planning. Most people use a real estate agent to buy/sell a house and go to a doctor when they are sick. But for some reason don't do the same when it comes to their financial future. Instead they attempt to do it alone. Schlagheck agrees noting that "you need all the professional help you can muster."

5. Build income streams via a ladder of annuities.

One type of risk that we all hope to face is "longevity" risk--that is that we live so long as to outlive our savings. One way of investing against this risk is with annuities since they guarantee income for life. By "laddering" Schlagheck means that you use a mix of different types of annuities. The book goes into great detail on this investment class.

6. Invest in health care insurance.

Many people wouldn't think of buying insurance as investing. But when you think of it, one reason you are investing is to have money to pay for future medical expenses. Having longterm supplemental coverage accomplishes the same thing. Schlagheck equates not having some form of longterm care protection with playing Russian roulette.

All in all, "Cash Rich Retirement" is a sound, easy-to-read retirement planning book.

Amazon link: Cash-Rich Retirement: Use the Investing Techniques of the Mega-Wealthy to Secure Your Retirement Future